Bahamas - FirstCaribbean International Bank

Notes to the Consolidated Financial Statements
October 31, 2007
(expressed in thousands of Bahamian dollars)
90
29. Critical accounting estimates and judgements in applying accounting policies
(continued)
i) Disallowance of hedge effectiveness accounting
As discussed in Note 2, during the year, a review of the Bank’s hedge accounting
revealed that existing hedge documentation was not appropriate. Consequently,
all hedges existing as of that date were disqualified from having met the criteria
for hedge accounting. The effect is tabulated below.
$’000
The effect on the consolidated statement of income for
2006 was as follows:
Net income for the year as previously reported 110,672
Adjusted for:
Decrease in operating income (9,972)
Net income for the year as restated 100,700
Earnings per share in cents as previously reported
– basic 92.1
Earnings per share in cents as restated
– basic 83.8
The effect on the balance sheet for 2006 was as follows:
Total equity as previously reported 605,406
Adjusted for:
Increase in reserves 474
Decrease in retained earnings (9,142)
Total equity as restated 596,738
ii) Settlement date accounting
Effective March 1, 2007, the Bank changed the date on which all purchases and
sales of financial assets at fair value through profit and loss are to be recognised
from trade date to settlement date. The audited October 31, 2006 balances
have been restated to reflect this change. The impact on the audited October
31, 2006 balances was to reduce trading securities by $157,000, other assets by
$82,000 and other liabilities by $239,000.
See Auditors’ Report Page 56.
iii) Fair value of financial instruments
Where the fair values of financial assets and financial liabilities recorded on the
balance sheet cannot be derived from active markets, they are determined using
a variety of valuation techniques that include the use of mathematical models.
The input for these models is taken from observable markets where possible,
but where this is not possible, a degree of judgement is required in establishing
fair values. The judgement includes considerations of liquidity and model inputs
such as correlation and volatility for longer dated derivatives.
iv) Loan fee recognition estimate
The Bank’s current processes and information technology systems do not support
the treatment of loan fee income and the related direct costs as an adjustment
to the effective interest rate and the deferral of the non-current portion. As a
consequence, management has to estimate the effect of this treatment.
In accordance with IAS 18 Revenue, loan origination fees relating to loans that
have a high probability of being drawn down, are to be deferred (together with
related direct costs) and recognised as an adjustment to the effective interest
yield on the loan. As a result of this change, $19,456 has been reclassified
between other liabilities and loans and advances.
30. Fiduciary activities
The Bank provides custody and trustee discretionary investment management
services to third parties. Those assets that are held in a fiduciary capacity are not
included in these financial statements. At the balance sheet date, the Bank had
investment assets under administration on behalf of third parties amounting to
$21 (2006 — $201).
31. Principal subsidiary undertakings
Name
FirstCaribbean International Finance Corporation
(Bahamas) Limited
FirstCaribbean International (Bahamas)
Nominees Company Limited
FirstCaribbean International Land Holdings (TCI) Limited
All subsidiaries are wholly owned.
Country of
incorporation
Bahamas
Bahamas
Turks & Caicos Islands